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Empowerment or Exploitation? A Five-Part Process for Evaluating Platforms

Sangeet Choudary, an entrepreneur and best-selling business author, makes a compelling case that the platform economy is better suited to certain types of work than others—namely, work that is highly differentiated, rather than work that is commoditized. The question of whether platforms are exploiting workers or empowering them has to be evaluated on a case-by-case basis, Choudary argues. He has developed five criteria that help answer this question:

Is the work commoditized (like a ride on Uber) or differentiated (like a home on Airbnb)?

Does the platform standardize the pricing, or let the providers set their own prices (like freelancers on Upwork)?

Does the reputation system allow providers to get more business (Airbnb and Upwork are two such examples) or does it simply remove bad apples?

Does the platform allow repeated exchanges between provider and consumer, or are most transactions a one-time exchange (as with ride-sharing)?

Does the platform allow providers to start building their own followings (like on YouTube)?

Choudary also offered interesting insights into Amazon’s business model, which he believes is debunking the myth that platforms can scale so quickly because they don’t own any assets. The more you buy, the more data you give Amazon, Choudary says, and the more data you give Amazon, the more it influences you to buy further. Amazon uses this demand to build supply bases. Choudary predicts Amazon will lead the smart home market, and will also be a major player in the renewable energy space. Choudary acknowledges the appeal and benefits of platform cooperatives, but sees them as still a sideshow at this point. Startups require heavy investment to scale their network effects, Choudary points out, so platform cooperatives work most effectively for highly localized platforms or highly specific ones.

The forces that led to the platform economy, like increased Internet usage and data collection, are only getting stronger, Choudary says. While not all companies will become platforms, companies will at least have to interface with the platform economy. Part of the growing backlash against the tech industry, according to Choudary, is that platforms gain immense power over their ecosystems. To determine the degree to which this is problematic, Choudary encourages regulators and government officials to evaluate whether or not the success of the platform is at odds with the success of participants on the platform.